Cash Flow Solutions

How to Use Funding for Your Small Business

Florists working to grow their business after receiving funding

How to Use Your Funds for Your Small Business

With a strategic plan, you will be less likely to waste the opportunity to put the funds to work for your business. As you develop your plan, consider these 11 ways you can use your small business funds:

  1. Purchasing inventory

One of the most common reasons that business owners pursue a loan is to purchase inventory. Most businesses need a significant amount of inventory to keep their companies running smoothly, and this can sometimes be difficult, especially if your business is just getting started or experiencing unusual demand. Using a small business loan to buy inventory is a great way to help you respond quickly to consumer demand, prepare for peak shopping seasons and set yourself apart from the competition. Three industries that require a lot of inventory are retail, restaurants and construction businesses.

  1. Investing in equipment

Unfortunately, small business owners are not always prepared financially when a piece of equipment breaks down and needs to be replaced. Other companies may put off growing their business because they do not have the funds to purchase the necessary equipment for expansion. A small business loan can help companies get the funds they need to upgrade, replace or purchase more equipment. Three of the industries that can benefit from equipment loans the most are transportation, energy and telecommunications, as these industries often require the use of expensive equipment.

  1. Hiring staff

Whether you are ready to hire your first employee, or you need to bring on additional staff to help meet growing business demands, hiring staff is a considerable investment. According to the U.S. Department of Labor, bad hires and employee turnover can ultimately end up costing your business 30 percent of its yearly earnings. Instead of bargain shopping for your next employees, you can use a business loan to get the initial funds that you need to hire the right candidates.

  1. Building a website

In today’s digital marketplace, it’s nearly impossible to compete without having an attractive website that is easy to navigate and use. What many new business owners may not realize is that the cost of building a killer business website goes beyond just buying a domain. In addition to domain and hosting costs, there are also fees involved with using a drag-and-drop website building service like Wix or utilizing premium themes in a do-it-yourself platform like WordPress. If you plan to hire a professional, web development services can range anywhere from $1,000 to $100,000 depending on your needs. A business loan is a great way to cover these startup costs for your website.

  1. Developing your marketing

Though having an effective website is important, you still need to market your products or services. If you are planning on handling your marketing in-house, there are a variety of marketing tools for small businesses that can help you promote your business online and off. Many businesses also choose to focus on their core business and outsource their marketing to a contractor or agency. These marketing costs can all be covered with a small business loan.

  1. Covering operational expenses

When business is slow, or if companies find themselves dealing with unexpected costs, you may sometimes need help covering day-to-day operational expenses like utilities, accounting or even paying staff. A business loan can help you get the funds you need to keep things running smoothly in the meantime.

  1. Expanding your business

Fifty-nine percent of small businesses apply for funding in the hopes of expanding their businesses or taking on opportunities. There are many costs to consider when expanding your business. In fact, many of the uses for a business loan that are outlined above are expenses that you might incur while trying to grow your business. Whether you need to buy more inventory or equipment, hire more staff or expand other aspects of your brand, a business loan can help give you the initial capital that you need to take your business to the next level.

  1. Managing cash flow

Cash flow describes the process that a company receives and disburses funds. The way that you manage the money that enters and leaves your business can be the difference between success and failure. Obviously, you need to meet payroll, keep the utilities turned on and pay for your site’s lease or mortgage. Over and above the basics, you also need access to funds that can help you exploit opportunities to grow profits.

If you have access to quick funding from an online lender, you won’t have to turn down a new opportunity just because you lack available cash in your bank account. If extra training, a piece of modern equipment or a larger inventory order would contribute to your bottom line, a line of credit can provide the solution.

  1. Weathering unexpected problems

Running a business includes confronting a series of risks. Some threats to your company could reduce your income or increase your costs. Very often, the way that companies can manage risks determines their success and, in many cases, their longevity. No matter how well you plan, unexpected problems arise from time-to-time. If you have to close because of foul weather, one of your employees wrecks the company car or some other unanticipated problem arises, you could find your business strapped for ready cash.

Without the resources to fix or even wait out some problems, your very profitable and solid business could even fail. When you know you can always draw upon a line of credit or another kind of financing, you can enjoy peace of mind.

  1. Improving your business’s credit-worthiness

Traditional finance companies want proof that your company manages debt well. If your business never borrows money, it’s tough for you to establish yourself as a good credit risk. Alternatively, you could develop a plan to manage your credit.

After that, use funds from an online loan for sound business reasons that help you increase your profits. Once you establish a good history of making prompt payments and managing credit well, you’ll become a more attractive customer for all kinds of lenders.

Once you can confidently show lenders that you can manage loans well, you’re going to find that the cost of funding gets cheaper. This means that you can use borrowed money to profit even more. Very often, those first loans get used just to demonstrate that you know how to manage loans. If they also help you increase your profits, you’ll know that your credit management plan was sound.

  1. Leveraging expertise

Business owners also use lines of credit to access the advice and training of experts in their fields. For example, if you have a sales team and you determine that they would be more successful with a new script and a new approach, you may decide to hire a sales consultant to help you draft the new script, train your sales staff and implement the program.

Similarly, if you decide that new software would speed up your business processes and lower expenses, you may decide to use your business line of credit to hire a software consultant to help you choose, install and use the software.

Research Small Business Loan Options

Once you have decided exactly how you plan to use the money, it is time to do some research on your options for small business loans. Remember, traditional lending is not the only way to get the money that you need to start or expand your business. Alternative lenders offer flexible funding options for a variety of industries including:

  • Retail businesses
  • Hospitality businesses
  • Construction businesses
  • Auto repair businesses
  • Beauty salons and spas
  • Medical businesses
  • Dental businesses
  • Restaurants
  • Wholesaling
  • And more!

Now that we’ve covered how to apply for and use additional funds, we’ll break down the different types of funding available.

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